I could have guessed that http://paulgraham.com/future.html would have scared quite a few traditional VCs. I'm surprised that it scares the big angels so much.
So A Blogger Walks Into A Bar…
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Re: So A Blogger Walks Into A Bar…
#72In what sense do antitrust laws apply to investors? Why is it unlawful for investors to band together to get better terms for themselves? Wouldn't it be perfectly legal for these people to sit around a table an agree to merge and start a fund? If that's the case, how could it be unlawful for them to work on a joint venture? Just because I don't like the JV doesn't make it unlawful!
If the FTC determines that the joint venture would form a monopoly, they could in fact block it on antitrust grounds. The FTC blocks mergers all the time. Explicit cooperation in restraint of trade is always illegal, though.
According to Wikipedia [1], there were over 250,000 angel investors active in 2007. If 10 of those investors were to get together to form a "super-group", I'm not sure it would match up with the definition of a monopoly.
I don't know anything about the collusion arguments though.
Re: So A Blogger Walks Into A Bar…
#73Earlier quoted context omitted.
A joint venture (or a legal entity aka as a company) operates under very different rules than parties working together, probably without a contract. I don't know how the antitrust laws apply, not even if what they are doing collude with any law at all, despite preventing healthy competition, but your questions come from the wrong premises.
As we just saw with TechCrunch v FusionGarage, the paper contract has little to do with whether something is or isn't a joint venture. Broaden the word "antitrust" to "laws against all contracts in restraint of trade", and re-ask the question to yourself. These people are investors . Investors are allowed to work together, aren't they?
I don't know what law they broke (if any at all). I don't know if they can keep doing whatever they are doing.
I was just arguing against "legal to ... agree to merge and start a fund?", because yes, it would be legal.
You're saying they are one step of becoming something we all agree it's ok to do. But they haven't take this step.
Again, I'm not saying they're doing something illegal. Just that you can't apply the "joint-venture/company" operating rules for them, because this is not what they are.
Bringing "what if" conditions to a situation doesn't change it. You have to analyze for what it is.
Sorry if it looked like I disagree with you about the legality. I just didn't think you had a strong backup for the questions.
Re: So A Blogger Walks Into A Bar…
#74I'm not surprised by the accusation, but I have about as much trust in TechCrunch as I do in a general soothsayer
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#75Screwing over entrepreneurs on the seed stage is just evil. Gordon-Gekko-evil.
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#76I do hope he's wrong, or that this a mistake of some sort. The rise of Angel investors has seen a lot of ideas and entrepreneurs get needed money when they might not have under the traditional VC model. Something like this, if true, will cause the government to step in, and probably regulate and change things for the worse for a great many people. It won't just hurt these few super angels. It will take everyone with…
To be fair, this is Michael Arrington. He's not above sensationalism to get a few extra clicks.
In Arrington's defense his claims are laid out clearly without any weasel words. Either this is happening or it isn't. So while I'm pretty meh about TC as a whole, I'm giving him the benefit of the doubt on this one.
Re: So A Blogger Walks Into A Bar…
#77Earlier quoted context omitted.
Or, this is a group of people collaborating to generate the best possible outcome for their own business. Every joint venture can be framed in anticompetitive terms. But in this case, what possible undue market influence can they have? The market will find other people to take these deals.
That's an unrealistically high standard and I can't think of any recent case which would meet it. Why didn't the market find a solution to Microsoft in the 90's or Intel in 2000's and, more importantly, why did the Feds feel the need to intervene?
Microsoft owned the entire personal computing platform and was using it to put new companies in marginally related markets out of business.
Are you suggesting that 10 angel investors have control over all the money? Is one of them Lex Luthor?
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#78Re: So A Blogger Walks Into A Bar…
#79Earlier quoted context omitted.
As we just saw with TechCrunch v FusionGarage, the paper contract has little to do with whether something is or isn't a joint venture. Broaden the word "antitrust" to "laws against all contracts in restraint of trade", and re-ask the question to yourself. These people are investors . Investors are allowed to work together, aren't they?
I don't know what law they broke (if any at all). I don't know if they can keep doing whatever they are doing. I was just arguing against "legal to ... agree to merge and start a fund?", because yes, it would be legal. You're saying they are one step of becoming something we all agree it's ok to do. But they haven't take this step. Again, I'm not saying they're doing something illegal. Just that you can't apply the "…
Before I turn into "the guy on the thread arguing that the Evil Angels are just peachy", banding together for the sole purpose of pushing back YC and making life harder for founder is a total dick move, and I'm happy Arrington is shaming them for it.
But it is a much more ambitious claim to say that they're breaking federal laws by doing it.
Re: So A Blogger Walks Into A Bar…
#80Game theory. 10 players make for a highly unstable equilibrium, especially given the potential for absurdly high profits for deviating to fund one hot company. One of them is even "highly uncomfortable." The key is to shop around and negotiate intelligently.
I bet that one uncomfortable person is also the wealthiest. Greed will never allow investing to become anything close to a cartel.